Judge Clears Ernst & Young
In BCCI Claim by Deloitte

LONDON -- A British High Court judge dismissed a $1.8 billion claim by Deloitte & Touche, the liquidator of Bank of Credit & Commerce International, or BCCI, against accounting firm Ernst & Young.

Deloitte & Touche, which is still pursuing a separate claim of $1.7 billion against Ernst & Young, said it is considering an appeal. The liquidator has also filed suits against other institutions including Price Waterhouse, the main auditors of BCCI.

BCCI was closed down by central banks in 1991 and collapsed with debts of more than $12 billion amid evidence of massive fraud and money laundering, which has since led to a complex series of court cases around the world. The case heard in the London High Court concerned the fact that Ernst & Whinney, the predecessor of Ernst & Young, audited BCCI Holdings (Luxembourg) SA and its subsidiary BCCI SA in 1985 and 1986.

In handing down his verdict, High Court Judge Hugh Laddie said that Ernst & Whinney's audit of BCCI Holdings did not make it accountable for losses that occurred in BCCI Overseas, another subsidiary of the group. Judge Laddie has not yet ruled on the $1.7 billion case concerning Ernst & Young's role in losses at BCCI Holdings and BCCI SA themselves.

Ernst & Young said it expected this verdict. "BCCI Overseas is the [subsidiary] which had the majority of the problems, and we never audited it," said Nick Land, senior partner at Ernst & Young in London. Judge Laddie also ruled that Deloitte & Touche will have to pay Ernst & Young's costs.

Deloitte & Touche spokesman Nicholas Freer said bona fide creditors of BCCI are currently receiving $2.65 billion, or 24.5% of bona fide claims, and the liquidator hopes to pay out another 10% by April 1998. "There is an action [pending] against Price Waterhouse for $4 billion and one against the Bank of England for $1 billion, and an action in Luxembourg against Institut Monetaire de Luxembourg," said Mr. Freer.